Logistics and Supply Chain Management, 6th Edition

The concept of lead-time

From the customer’s viewpoint there is only one lead-time: the elapsed time from order to delivery. Clearly this is a crucial competitive variable as more and more markets become increasingly time-competitive. Nevertheless it represents only a partial view of lead-time. Just as important, from the supplier’s perspective, is the time it takes to convert an order into cash and, indeed, the total time that working capital is committed from when materials are first procured through to when the customer’s payment is received.

Let us examine both of these lead-time concepts in turn.

1 The order-to-delivery cycle

From a marketing point of view, the time taken from receipt of a customer’s order through to delivery (sometimes ...